The concept of turnover is false; profits are the definition of sanity, And the cash flow is the real thing. It’s all to be so simple, yet it never fails to amaze me how many managers, directors, and business owners believe they are focused on making money. However, they’re often far from being focused on profits. Their capacity to earn a profit is hampered by the absence of a methodical approach to the tasks of modern-day business.
The process of achieving profit is not difficult at all. There are three areas to take into consideration: improving the efficiency of the company in identifying its potential and making the company an innovative business for the future. Three basic truths that can help us to focus on these measures of profitability are as follows:
1. Concentration is the only way to real success
Effective results require managers to focus all their energy on the least amount of products, product lines and services, customers markets, distributive channels, the end-users, and other things which will generate profit. Managers should concentrate on products, customers, and channels that generate cash as well as are likely to bring in future cash. However, they must limit the amount of attention and money devoted to problematic product customers, channels, and products that are primarily responsible for costs.
Simple problems, you may suggest, but a lot of companies are unable to accurately assess their profit channels, customers, and products which are the most important areas of the result of every business. Analyzing the changes in results isn’t too difficult. However, diagnosing is more difficult. To be capable of anticipating and responding to any change, it is essential to keep track of any significant deviations in performance from expectations and pay attention to the lifecycle of every product, channel or customer in order to identify issues and focus on today’s as well as tomorrow’s innovations.
2. Focus on your leadership
Leadership isn’t just about numbers. The company with the highest market share might have leadership in a specific segment and be lagging in profitability in comparison to competitors with smaller numbers. To achieve leadership, the product has to be designed to meet one or more of the actual needs of the consumer who is willing to spend the money.
Profit is ultimately the outcome of differentiating. The reason for differentiation could be due to cost or a quality attribute like quality, reliability, appearance or design, recognition, and acceptance, rapid service delivery, technical excellence, etc. However, efforts to improve productivity through economies of scale or scale must not be ignored to transfer any savings to the customers.
But even with the appearance of competition, customers are willing to purchase and buy your products over rivals’ goods are proven factors for achieving profits. Why? Simply stated, when these aspects are not clearly established that a product is suspected of being or is becoming marginal.
3. Make sure you are knowledgeable in your business
Knowledge is the key to success, just as your customer represents the company. The business is a human-based enterprise that is shaped or destroyed by the performance of its staff from the top to the lowest! Knowledge is a uniquely human resource and is only available to the minds and skills of the employees in the company. It is only useful by the value it brings to the customer.
It is important to note that being able to accomplish something at the same level as the rest of the world isn’t enough. This is not enough to be able to hold the position of leadership that is required for a business to avoid the dangers of demise and doom. Only excellence can earn a profit, and the only real benefit is that of an innovative, who is the main source of differentiation. It gives an organization the chance of survival and growth. This comes from certain unique information possessed by the group of people that comprise the company.
Therefore, managers must make sure they ask the right diagnostics; “How good is our expertise?” “How efficiently is it being utilized?” and “What do we haven’t been missing?” The results of the knowledge analysis could be integrated into our analysis of marketing, bringing new market opportunities that could have been overlooked or underestimated. The results from the analysis of the market can be used to identify the requirements for updated or new information.
Profits should be the main driver of every business, and more so in these difficult times. It’s important to remember that it was Henry Ford who said: “A company that earns nothing more than money is a failing business.” This is so accurate. Although profit is the primary driving factor, it can’t be realized in the modern business environment without steps to help a business succeed, flourish and grow.
Andrew M. Pearson
Turning Good Businesses Into Unique Businesses
Andrew Pearson is a management coach who works with managers, directors, and owners of new and established companies to help them develop strategies for generating more growth for their businesses.